Gold Prices Continue to Break Out
Dips in the price of gold have been aggressively bought since last weeks Fed meeting and there are likely a number of participants that have missed out on this move on the lack of a pullback.
Those market players ideally want to see a pullback to $1350, the prior breakout point, to look to get involved in this rally. So far corrections in the yellow metal have been shallow and a bulk of the recent rally has happened in early Asian trading.
At this point, it does not seem very likely that we get a return to $1350. A level I am keeping an eye out on is $1391 which followed by $1375. The latter level reflects the 2016 high and should be widely watched. $1391 comes from a weekly chart and was important resistance in 2013 and 2014.
To the upside, there are two major levels of resistance that stand out. The first resistance level falls at $1486 and reflects support from 2011. The level also offered some resistance in 2013. Beyond that, I see strong resistance at $1562. This level offered support multiple times from mid-2011 until early 2013.
Powell May Offer a Catalyst
Fed Chair Powell is scheduled to speak later tonight. Take a look at our earlier article for full details on why his speech can trigger the next leg higher in gold.
With the futures markets fully pricing in a July cut, today seems like a good day for Powell to confirm a move next month. It’s rare that the Fed makes a move without communication and there is no reason to believe that there will be an exception this time around.
Aside from Powell, several other Fed members will be speaking today. It is expected for them to come across dovish, the importance will be on a clear signal that they are ready to cut next month.
The most dovish case would be if they signal for a 50 basis point cut. On the other hand, the most hawkish case would be if they try and backtrack the markets. As in level set expectations for a cut much later this year.